Courts have limited authority to intervene in arbitration matters
The Alberta Court of Appeal upheld the enforcement of an arbitration agreement in an employment contract, affirming that courts have limited authority to intervene, even when related litigation exists.
The respondent served as CEO and director of PesoRama Inc. until the company dismissed him in 2021. The employment agreement included an arbitration clause covering employment disputes. After the termination, the former executive retained legal counsel to seek compensation and proposed arbitration if they could not settle.
The former executive filed a statement of claim under corporate law as an oppression action but soon offered to discontinue it. In response, the company filed a statement of defence and counterclaim. The executive then formally initiated arbitration proceedings, while the company moved to block arbitration, arguing it was unfair and unnecessary given the ongoing litigation.
The chambers justice ruled that the respondent was entitled to discontinue the oppression action under procedural rules, noting that doing so would not impact other stakeholders.
Regarding arbitration, the chambers justice found that the employment contract contained standard employment terms, including a valid arbitration clause. The company's termination letter referred to the agreement and its obligations, supporting its enforceability. The chambers justice determined whether the agreement remained operative was a question of mixed fact and law, which an arbitrator should decide.
The company also argued that arbitration would result in unnecessary duplication and be manifestly unfair under s. 6(c) of the Arbitration Act. The chambers justice rejected this argument, stating that if the arbitrator found the agreement inoperative, arbitration would not proceed, and the parties could seek alternative legal remedies.
On appeal, the company contended that the chambers justice erred by failing to apply s. 6(c) to prevent alleged unfair treatment. It relied on past case law suggesting that courts could stay arbitration if it overlapped with existing litigation. However, the Court of Appeal ruled that the Supreme Court's decision in Telus Communications Inc. v. Wellman, 2019 SCC 19, had overtaken this reasoning, emphasizing limited court intervention in arbitration matters.
The appellate court found that s. 6(c) prohibits courts from arbitration due to potential duplication. It also dismissed the argument that the individual had abandoned the right to arbitrate by initially pursuing a court action. The chambers justice had concluded that the oppression action and wrongful dismissal claim were distinct, and the Court of Appeal saw no reason to interfere with that finding. As a result, the court dismissed the appeal, affirming the decision that arbitration should proceed.
